The US Purchasing Managers Index (PMI) for April was released Wednesday by the Institute for Supply Management (ISM), and came at a level of 49.2, just below the key 50 mark that separates US manufacturing expansion from contraction
The US PMI had previously been in contraction territory for 16 straight months until it poked its head into expansion in March with a score of 50.3, but it didn’t last.
The overall economy continued in expansion for the 48th month after one month of contraction in April 2020. The PMI tracks closely but not exactly with the overall US economy.
A Manufacturing PMI above 42.5, over a period of time, generally indicates an expansion of the overall economy, according to ISM.
The other PMI numbers we track were mixed but mostly negative.
That starts with the New Order Index, which moved back into contraction territory after one month of expansion. It registered at 49.1, 2.3 percentage points lower than the 51.4 recorded in March, in a bad sign for future US manufacturing activity.
The April reading of the Production Index, at 51.3, is 3.3 percentage points lower than March’s figure of 54.6 but still showing expansion.
The Prices Index registered a big 60.9, up 5.1 percentage points compared to the reading of 55.8 in March.
That means companies saw a sharp rise in the cost of components, materials and other inputs (below 50 = falling prices), as inflation concerns remain.
In more negative news, the Backlog of Orders Index registered 45.4, down 0.9 percentage point compared to the 46.3 recorded in March. That means the order book of most companies is shrinking, with the level still well below the 50 mark.
The Supplier Deliveries Index figure of 48.9 is 1 percentage point lower than the 49.9 recorded in March, and also under the 50 mark.
Supplier Deliveries is the only ISM index that is inversed, with a reading of above 50 indicating slower deliveries, which is typical as the economy improves and customer demand increases - or the reverse.
The Inventories Index registered 48.2, the same reading as in March, with the score below 50 indicating inventory levels at companies are again decreasing.
Said Timothy Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee: “Demand remains at the early stages of recovery, with continuing signs of improving conditions. Production execution continued to expand in April, but at a slower rate of growth than in prior months. Suppliers continue to have capacity but work to improve lead times, due to their raw material supply chain disruptions.”
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As always, the ISM report provides a graphic of the full PMI scores the last 12 months, which as can be seen indicates the measure has below the key 50 mark since November 2022, with the exception of March 2024. It is now averaging just 47.7 over the past year.
US PMI Last 12 Months
Source: ISM
Of the 18 sectors tracked by ISM, nine manufacturing industries reporting growth in April. They are, in order: Non-metallic Mineral Products; Printing & Related Support Activities; Primary Metals; Textile Mills; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Transportation Equipment; Chemical Products; and Plastics & Rubber Products.
As always, there were some interesting comments from PMI survey respondents.
“Conditions are improving as demand is starting to recover. Costs continue to be a major concern as suppliers that rapidly increased prices in the follow-up from COVID-19 are slow to return to pre-pandemic levels.” said one manager in the chemicals sector.
Added one respondent in the food and beverage sector: “Order flow has stabilized. It took some customers longer to replenish their supply chain network after the fourth-quarter rush we commonly have. Order rates are expected to remain stable through August.”
Finally, a manager in the fabricated metals sector noted that “Business is slowing down — it has been a gradual decline for the last several months. We are not seeing new orders at last year’s level, or at this year’s budgeted levels.”
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